When it comes time to pay our cable bill or buy groceries, the process is fairly straightforward. We look at the bill or cash register, get out our wallets and cough up the money. Then we’re on our way. In the construction industry, the billing process is a bit more complicated. Projects that are in full swing have workers onsite from several different trades, materials getting delivered, equipment in use and other costs like that. The Owners of these projects release progress payments as the project continues (often monthly). The amount paid is supposed to represent the amount of work done since the last time they paid a bill. What determines how much any particular task of work is worth in comparison to the entire project? That’s where the Schedule of Values (SOV) comes in! So what should be included in a schedule of values? Check out these 7 tips for contractors and download our free Schedule of Values template!
Click below to jump to a specific section:
- What Is A Schedule Of Values (SOV)?
- What Does A Schedule Of Values Look Like?
- Download A Free Schedule of Values Template
- Schedule Of Values Example
- Five SOV Tips For Contractors
Watch Video Version on YouTube!
What Is A Schedule Of Values (SOV)?
In short, a Schedule of Values (SOV) is a breakdown of each billable item of work on the project, along with the subsequent dollar-value of that particular work task.
The exact breakdown of what a SOV should include will vary from contractor to contractor. So will the format – it’s almost always a table of some kind, but is usually formatted into a construction contract.
Firstly, a Contractor typically discusses how their SOV should be broken down with their Client in the most early stages of a project. This may occur during contract negotiations, but it can also take place during the bidding process. Some Owners/Clients provide Contractors with a bid form that outlines exactly how the Contractor should break out their price.
It’s a bit intuitive but worth mentioning on it’s own – the sum of all line items on a SOV will equal the total contract value, at least in lump sum contract scenarios.
Now let’s take a look at a sample of a Schedule of Values in construction!
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What Does A Schedule Of Values Look Like?
Now that we’ve defined the purpose of a Schedule of Values in construction, let’s actually look at one. Here’s what a typical schedule of values looks like on a requisition form:
On the far left, each item of work is listed in order within the ‘Item Description’ column. The dollar value of each item is subsequently listed in column “A”.
While not part of a Schedule of Values per se, let’s identify the other columns shown here:
- Column B ‘Amount Previously Billed’: This is the dollar amount cumulatively billed for each item on all previous bills.
- Column C ‘Amount Billed This Period’: Pretty straightforward, but this is where a Contractor states how much they’re billing against each item in their Schedule of Values on this bill.
- Column D ‘Stored Materials’: The value of any materials that either have been or are being billed that aren’t yet installed or used.
- Column E ‘Completed & Stored To Date’: The sum of what’s been billed already, what’s being billed now and the value of stored materials [column B + C + D]
Columns F, G & H are most often automatic. As you can see, the way each are calculated are noted above.
For your information, the AIA G703 is the most commonly used standardized Schedule of Values form in construction in terms of billing.
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Construction SOV Example
We recently published an article titled “How Does Progress Billing Work In Construction? The 8 Essential Steps“. One of the major steps in this process is the submission of requisitions by contractors, which is done in accordance with each Contractor’s Schedule of Values. The sample SOV below is taken from that article, should you wish to read more.
As we discuss some Schedule of Values tips for Contractors, we’ll occasionally reference back to the SOV above.
A few things we can observe from this sample are as follows:
- All line items are clearly separated by scope.
- Mobilization costs are called out on a separate line item, which represent start up costs not related to building.
- Item values are even figures, not complex decimals.
Related Articles:
- Time & Material Contract: Advantages & Disadvantages
- How Does Progress Billing Work In Construction? The 8 Essential Steps
- Cost To Complete Template: FREE Excel Download (ETC, EAC, BAC)
- Change Order Best Practices: What Contractors & Clients Need To Know
What Should Be Included In A Schedule Of Values: 5 Tips For Contractors
Without further ado, let’s talk about a few tips for contractors as they’re creating a SOV for their project. Here are our 7 top tips:
- Break Out Up-Front Costs: Payments that are required up front should be broken out as individual line items I.e. mMobilization, deposits, etc.
- Keep Financial Items On Separate Lines From Work Items. This includes things like bonds, insurance & contingency funds.
- Separate Labor From Materials: Create separate line items for labor/equipment values vs. material values needed on a particular work task. This makes it easier to bill for material purchases.
- Do Your Best To Keep Profit Margin Consistent Across All Line Items. While margin cannot be known for sure until work is underway, this will eliminate the chances of a few lines containing the majority of the profit
- Assign A Nice Even Value To As Many Line Items As You Can I.e. $50,000, not $50,003.41. Contract values are often odd dollar-figures, so this won’t be possible on all SOVs – I like to round those off in the mobilization figure and make the ‘real’ work items even numbers.
- Don’t Assign Any More Than One Subcontractor To A Particular Line. This makes it easier to track completion percentages for each one relative to the entire project.
- If You Aren’t Given A Bid Form, Submit Your Bidding Breakdown In The Same Format As What You’d Like Your Schedule Of Values To Be. That way, you aren’t arguing with the Client over what the SOV should look like at the time of contract signing.
In Summary
When it comes to construction billing, a clean, detailed schedule of values is a must have. Using the tips discussed in this article and referencing the sample above, you’ll make the billing process on your next project a breeze. Thanks for reading!
